When you have only $1,000 to invest, you might think your options are limited. But the good news is you’re wrong. With the growth of new financial services (fintech), you’re now able to invest in ways that once only the professionals had access to or that required lots of money. All of these services require little money to get you started on the path toward financial freedom.
1. Start With Your Spare Change
There are a number of apps out there that let you get started investing with literally less than $1. Acorns, for example, is an investing app that takes the spare change from every purchase you make and invests it in the stock market. So for example, when you buy your favorite chicken burrito at Chipotle for $6.50, Acorns will round that up to $7.00 and invest $0.50 in the stock market. Believe it or not, spare change really adds up!
There are no deposit or account minimums to maintain, and no penalties when withdrawing funds. The cost is $1 per month for your first $5,000, or 0.25% annually for accounts greater than $5,000.
Read our comprehensive review of Acorns.
2. Open a Retirement Account
Interested in investing for your future self? Another way to invest $1,000 is to open an IRA with a robo advisor. “IRA” stands for “individual retirement account,” and you’re eligible to contribute $5,500 per year, tax deductible!
Robo advisors — online automated investment services — make opening and managing IRAs very easy. Betterment is a popular robo advisor. When you sign up, the service determines your risk tolerance and builds a portfolio of exchange-traded funds (ETFs) aligned with your preferences. The entire service is automated, which means they handle everything on your behalf, including the trading, rebalancing and tax-loss harvesting.
There’s no account minimum with Betterment. Your fee will be 0.25% of the account balance per year. This will enable you to accumulate a steadily larger balance without the high fees.
Betterment is great because it offers a combination of professional management, diversification, low fees and no account minimum. Read our full review of Betterment.
3. Invest in Green Technology Companies
Want to invest, but also want to feel like you are doing good for the environment? You can when you invest in green technologies.
Wunder Capital might be a good place for you to invest your $1,000.
Wunder Capital is a unique investment platform that connects investors with commercial solar energy projects that need funding.
The platform requires a minimum of $1,000 to invest. With $1,000 you could invest in four motifs (but not including the $9.95).
4. Invest in Real Estate With Little Money
I bet you never thought real estate was an option with only $1,000. There is an investment product called a REIT (which stands for “real estate investment trust”). It’s similar to a mutual fund except, instead of stocks and bonds, the assets are income-producing real estate properties (office buildings, apartment buildings, single-family homes, etc.). Investors can invest in REITs and own and profit from real estate without the hassle of managing it.
Fundrise took the REIT and put it online, calling it an “eREIT.” Investing in an eREIT doesn’t require a middleman, which saves you fees when compared to traditional REITs. You need only $1,000 with Fundrise’s eREIT.
Read our comprehensive Fundrise review.
5. Own a Company
What if you just want to buy individual stocks? A thousand dollars is certainly enough, since some company shares sell for just $0.01! There are three primary ways to buy individual stocks:
- Directly — Not all companies offer this, so check their websites.
- Via a Transfer Agent — Some companies allow you to buy their stock directly but not via their website. Instead, you can purchase stock through a transfer agent (Computershare is an example of a transfer agent).
- Discount Broker — The easiest and most popular way to buy individual stocks is through a discount broker like E*Trade, TradeStation, or Ally Invest.
Buying stocks through a discount brokerage is your best option for a couple of reasons. First, you can count on every public company being listed. Second, there are tools within brokerage platforms meant to educate you how to make informed decisions. And third, the ability to track individual stocks in a single, easy-to-use dashboard is ideal.
Brokerage firms charge you per trade. So if you buy five shares of McDonald’s, the brokerages will charge you between $3.95 and $9.99 for that transaction (depending on the firm).
6. Invest in Other People’s Debt
Lending Club is an online peer-to-peer lending platform that was founded in 2006. Peer-to-peer platforms (P2P) allow individuals in need of a loan to borrow from other individuals (investors) willing to lend money in exchange for a return. So if you have $1,000 to invest, Lending Club is a great option.
As an investor with Lending Club, you can select which types of loans you want to fund: medical, debt consolidation, business, home improvement, etc. In addition, you can select the type of borrower by selecting criteria they must meet: age, employment status, credit score, etc.
A minimum of $1,000 is required to start investing with Lending Club. The platform charges 1% annually of total funds deposited on the platform. If you would like more information, I recommend reading our review of Lending Club.
7. Open a Bank CD
If putting your money into investments that have the risk of principal is something you’re not comfortable with, you can always opt to keep your money in your bank. although right now the returns are small, they’re the best places to start building a nest egg. If nothing else, you’ll never lose money on the investments you make.
Since checking and savings accounts pay close to nothing, you can begin investing your money in certificates of deposit (CDs) that tie up your money for a time but offer higher interest rates. For example, you can choose to invest $1,000 in a one-year CD that pays something close to 1% interest. During the year your money is tied up, you can make regular contributions into a money market account to increase your nest egg.
You won’t get high returns on your money, but you will get valuable time — and safety — to accumulate a larger amount of money for more significant investments later. One bank that offers competitive rates is Discover. Discover Bank offers one- to 10-year bank CDs. Their rates are competitive, and they offer IRA CDs as well.
Note: Annual percentage yield (APY) is accurate as of September 23, 2017. Applies to personal accounts only. Fees could reduce the earnings on the account. Rates may change at any time without prior notice, before or after the account is opened. No minimum balance to open.
You might have thought that $1,000 wasn’t enough to get started investing. As you can see, your options to invest $1,000 are plenty. It’s an achievement to have saved $1,000, and you are smart for wanting to invest it rather than blow it! If you ever think $1,000 isn’t a lot to get started… just remember that all wealthy investors out there all had to get their start somewhere.